ETHICAL PERSPECTIVE: MANAGERS AND STAKEHOLDER

Stakeholder - people who have an interest, claim, or stake in the organization, in

what it does, and in how well it performs.
- stakeholders are motivated to participate in an organization if they
receive inducements that exceed the value of the contributions they are required
to make.
Company's stakeholders

Government
Employees
Customers
Suppliers
Creditors
Community
Trade Unions
Owner(s)
Investors

Types Of stakeholder
Primary Stakeholders - usually internal stakeholders, are those that engage in
economic transactions with the business.
Secondary Stakeholders - usually external stakeholders, are those who although they do not engage in direct economic exchange with the business - are
affected by or can affect its actions.

STAKEHOLDER PERSPECTIVE
-Categories in to Three:
Separation perspective
Ethical perspective

 Integrated perspective

Separation perspective- The firm's ownersthe shareholdersmanagers

should always strive to act in the best interest of the firm's owners. This view
does not cause managers to ignore non-owner stakeholders; indeed, when
taking actions that benefit stakeholders also benefit owners, the separation
perspective would advise managers to do so.

Ethical perspective- The ethical perspective is that businesses have an

obligation to conduct themselves in a way that treats each stakeholder group
fairly. This view does not disregard the preferences and claims of shareholders,
but takes shareholder interests in consideration only to the extent that their
interests coincide with the greater good.

Integrated perspective- Suggests that firms cannot function independently of

the stakeholder environment in which they operate, making the effects of
managerial decisions and actions on non-owner stakeholders part and parcel of
decisions and actions made in the interests of owners.

Managers should be concerned with understanding and responding to stakeholder

interests as a way to improve the corporate performance.
Some stakeholder management approach that could be develop:
1. Managers should assess the ability of a particular stakeholder group to pose a
threat to the organization, or to be a supportive ally to help the firm to achieve its
goals.
2. The firm should assess the costs that stakeholders could impose to the
organization, if they are against the decision taken by the management.
3. The management assess the expected costs and benefits generated by
stakeholder

Identifying and mapping stakeholders

The identification and classification of the nature of the stakeholder relationships
with the firm is the necessary first step in order to develop an effective
stakeholder management strategy.
Three levels of stakeholder analysis to identify and map stakeholder relationships with
the corporation:
1. The rational level
-The first level of stakeholder analysis concerns how the corporation as a whole
fits into its larger environment. It requires the management to consider the history
and the nature of the business in which the firm operates, to accurately identify
those groups who have a stake in corporate activities.
2. The process level
- To develop a more meaningful stakeholder map, the second step requires
managers to consider the process level of their organizations.
3. The transactional level
-The third level of stakeholder analysis deals with the set of transactions that
managers in organizations have with stakeholders. This is the bottom line for
stakeholder management, as it concerns how in practice the organization interacts
with its
stakeholders.
Stakeholder Management
-stakeholder management have been developed with the aim to make managers more
aware of the diverse constituencies that they are obliged to serve and increase the
openness of management processes.
-these perspectives, the management is responsible for negotiating contracts with the
firms voluntary constituents, and for governing the relationships with the firms
involuntary stakeholders, in order to develop cooperative relationships with the firm. The
underlying assumption is that managers have a moral obligation to deal openly and
honestly with the firms stakeholders, and that managing the organization according to a
common standard of fairness will contribute to the long-term survival and success of the
firm.
Principles of Stakeholder Management

Principle 1 Managers should acknowledge and actively monitor the concerns of all
legitimate stakeholders, and should take their interests appropriately into account
indecision making and operations
Principle 2 Managers should listen to and openly communicate with stakeholders
about their respective concerns and contributions, and about the risks that they assume
because of their involvement with the corporation
Principle 3 Managers should adopt processes and modes of behavior that are
sensitive to the concerns and capabilities of each stakeholder constituency
Principle 4 Managers should recognize the interdependence of efforts and rewards
among stakeholders, and should attempt to achieve a fair distribution of the benefits
and burdens of corporate activity among them, taking into account their respective risks
and vulnerabilities
Principle 5 Managers should work cooperatively with other entities, both public and
private, to ensure that risks and harms arising from corporate activities are minimized
and where they cannot be avoided, appropriately compensated
Principle 6 Managers should avoid altogether activities that might jeopardize
inalienable human rights (e.g., the right to life) or give rise to risks, which, if clearly
understood, would be patently unacceptable to relevant stakeholders
Principle 7 Managers should acknowledge the potential conflicts between their own
role as corporate stakeholders their legal and moral responsibilities for the interests of
stakeholders, and should address such conflicts through open communication,
appropriate reporting and incentive systems and, where necessary, third party review.
STEPS FOR ETHICAL DECISION MAKING
The steps of the model discuss the key elements needed in order to design and
implement an effective stakeholder management approach within organizations:
1. Identify and map all stakeholders- The starting point for the organization is
to identify all its stakeholders, including both stakeholders in the strict sense
(those who have an interest at stake because they have made specific
investments in the firm in the form of human, financial capital or social capital)
and stakeholders in the broad sense (those individuals or groups whose
interest is involved because they undergo the external effects, positive or
negative, of corporate activity).
2. Assess issues at stake- Second, the legitimate claims of each stakeholder
groups should be identified and assessed, by understanding the nature of
their relationship with the firm.

3. Identify corporate values and existing commitments- Stakeholder

management is a way for the corporation to define its own stance with respect
to conflicting stakeholder claims. To reach this aim, it is important that the
management demonstrate that corporate values and existing commitments
underpin the whole stakeholder engagement process.
4. Prioritize issue- this stage, the management has to decide on the base of
which criteria stakeholder claims should be prioritized, in order to provide the
best response to the most urgent issues at stake.
5. Review/develop policies- decision-making processes dealing with the
design of practical solutions to specific issues.
6. Set objectives- specific objectives are identified in relation to the stakeholder
issues.
7. Measure performance - The Corporation should be able to tell how well its
stakeholder management processes are going which of course depends on
what objectives the firm has set for a specific stakeholder engagement
process.
8. Communicate and report- A crucial element for achieving the benefits of
stakeholder management is communication and reporting activities, both
internally, to provide the management with useful information on stakeholder
views and interests, and externally, to demonstrate to stakeholders that the
firm walks the talk.
9. Review commitments and policies- The initial position of the organization
on a specific issue that has been the focus of a stakeholder consultation
process should be reviewed as a result of the views expressed by
stakeholders during the consultation.
10. Continuous engagement- This final step of the model is an element
concerning the whole process of stakeholder management. It refers in fact to
the need of engaging with stakeholders as an ongoing approach, to allow
managers to consider stakeholder views in every decision-making process.

WRITTEN
REPORT
ETHICAL PERSPECTIVE:
MANAGERS AND STAKEHOLDERS

Abrenica, Ira Francheska B.

Alfonso, Joan Y.